[Sep 02, 2022] 2016-FRR Practice Exam Dumps – 99% Marks In GARP Exam [Q111-Q128]

Q111. A proprietary trading desk for a large bank hedges an Arab light OTC forward position with Brent crude oil
forwards. The trading desk benefits from using the most liquid OTC market to hedge, the market for the Brent
crude, but hedging its using the Brent contract, exposes itself to the following type of risk:

Q112. Which of the following are among the main uses of risk reports?
I. Identification of exceptional situations that require managerial attention.
II. Display the relative risk among different trades.
III. Specify how RAROC will be maximized within the bank.
IV. Estimate the overall risk levels of the bank.

Q113. Which one of the four following statements regarding minimum loss data standards is not correct?

Q114. Which one of the following areas does not typically report into a central operational risk function?

Q115. Which one of the four following activities is NOT a component of the daily VaR computing process?

Q116. Which of the following are the most common methods to increase liquidity in stressed conditions?
I. Selling or securitizing assets.
II. Obtaining additional credit lines.
III. Securing a better credit rating.

Q117. Suppose Delta Bank enters into a number of long-term commercial and retail loans at fixed rate prevailing at
the time the loans are originated. If the interest rates rise:

Q118. When trading exotic options, one needs to consider the following risks:
I. Spot foreign exchange risks
II. Forward foreign exchange risks
III. Plain vanilla options risks
IV. Option-specific risks

Q119. According to Basel II what constitutes Tier 2 capital?

Q120. Which statements correctly describe the features of using subscription databases for operational loss data
analysis?
Subscription databases
I. Provide central data repositories and benchmarking services to their members.
II. Can provide insight into whether the losses in a firm reflect the usual losses in their industry.
III. Assist with mapping the events to the appropriate business lines, risk categories and causes.
IV. Reflect only events that are interesting to the press and are reported in the press.

Q121. Foreign exchange rates are determined by various factors. Considering the drivers of exchange rates, which
one of the following changes would most likely strengthen the value of the USD against other foreign
currencies?

Q122. An options trader is assessing the aggregate risk of her currency options exposures. As an options buyer, she
can potentially ___ lose more than the premium originally paid. As an option seller, however, she has a ___
risk on the contract and always receives a premium.

Q123. Forward rate agreements (FRA) are:

Q124. Bank G has a 1-year VaR of USD 20 million at 99% confidence level while bank H has a 1-year VaR of USD
10 million at the same confidence level. Which bank is in a more risky position as measured by VaR?

Q125. Interest rate swaps are:

Q126. According to a Moody’s study, the most important drivers of the loss given default historically have been all of
the following EXCEPT:
I. Debt type and seniority
II. Macroeconomic environment
III. Obligor asset type
IV. Recourse

Q127. A bank customer expecting to pay its Brazilian supplier BRL 100 million asks Alpha Bank to buy Australian
dollars and sell Brazilian reals. Alpha bank does not hold reals so it asks for a quote to buy Brazilian reals in
the market. The market rate is 100. The bank quotes a selling rate of 101 to its customer and sells the reals at
this quoted price. Then the bank immediately buys the real at the market rate and completes foreign exchange
matched transaction. What is the financial impact of this transaction for Alpha bank?

Q128. An asset-sensitive bank will have a ___ cumulative gap and will benefit from ___ interest rates.